Avi Salzman

Shares of Sunrun, the country's largest rooftop solar company, hit a new 52-week low on Friday after the company said that residential solar installments are unlikely to grow this year. The earnings report only reinforced that the solar industry faces a slew of challenges in the early days of the Trump administration.

Sunrun stock was down 7.8% to $7.30, on track to close at its lowest level since March 2018. It was worth as much as $96.50 in 2021.

Sunrun delivered some good news. It posted late Thursday a third consecutive quarter of positive-cash-flow generation, and said it is gaining market share. The company passed 1 million customers in 2024, and added 12% more customers in the fourth quarter, year-over-year. It's also having luck getting people to buy battery systems with their solar panels, allowing the company to make more money on each sale. Batteries give the customers a backup option if the electric grid fails, and the opportunity to better manage their power use.

But 2025 looks dicey for several reasons. The first is that Congress and the Trump administration are looking to cut the tax credits that make up a significant portion of Sunrun's earnings. Today, solar projects can qualify for credits worth 30% or more of the value of the project. Sunrun mostly leases panels to customers, charging them for the power those panels produce at rates that the company says are cheaper than the local utility rates. But the economics would get significantly worse if those credits disappear.

And Sunrun's latest earnings show some weakness -- even before considering the coming policy challenges, analysts said. The company missed expectations for cash generation for the fourth quarter, and lowered its guidance for 2025 cash generation. It now expects to generate cash of $200 million to $500 million, down from prior guidance for $350 million to $600 million. Chief Financial Officer Danny Abajian blamed slightly lower volumes, higher capital expenses and a slower ramp-up in certain tax credits involving the company's partners.

Multiple analysts reduced their price targets after the earnings report was released. Mizuho analyst Maheep Mandloi still rates the stock at Outperform but took his target down to $15 from $18. Jefferies analyst Julien Dumoulin-Smith cut his target to $12 from $17. He still thinks Sunrun stands out as a strong performer at a time when the entire residential solar industry is facing trouble.

"We view positive fourth quarter cash generation as a strong indicator of Sunrun's ability to 'weather the storm', and we stress that Sunrun is still guiding to positive cash generation for all 4 quarters of 2025," he wrote.

Write to Avi Salzman at avi.salzman@barrons.com

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February 28, 2025 14:10 ET (19:10 GMT)

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